Profitability, Accounting Theory and Methodology, The Selected Essays of Geoffrey Whittington (Routledge Historical Perspectives in Accounting)

460 Pages·2007·2.05 MB·English

by  J. Whittington

Profitability, Accounting Theory and
Methodology
Geoffrey Whittington is one of Britain’s leading accounting theorists and researchers. He
became a Chartered Accountant after studying under Professors W.T.Baxter and
H.C.Edey at the LSE, and then obtained a Ph.D. in economics from Cambridge, and has
been a major contributor to the accounting literature for over 30 years, with significant
contributions to economics as well. He held Chairs of Accounting at the Universities of
Edinburgh (1972–5), Bristol (1975–88) and Cambridge (1988–2001). He was as a
member of the UK Monopolies and Mergers Commission (1987–96), and he served first
as a consultant and then as a member of the Accounting Standards Board. From 2001 to
2006 he was a full-time member of the International Accounting Standards Board, based
in London.
Profitability, Accounting Theory and Methodology brings together for the first time a
selection of his most important essays and articles, encompassing his work on inflation
accounting, accounting theory and methodology, standard setting and empirical analysis
of financial accounting data. The book also includes a new introduction which discusses
the evolution of his professional career and places the articles in the context of their times
and in his own intellectual development. This book will be extremely useful for historians
of accounting as well as accountancy practitioners and researchers.
Routledge Historical Perspectives in
Accounting
Edited by Stephen A.Zeff
Rice University, USA
1 Profitability, Accounting Theory and Methodology
The selected essays of Geoffrey Whittington
Geoffrey Whittington
2 Financial Reporting in the UK
A history of the Accounting Standards Committee, 1969–1990
Brian A.Rutherford
Profitability, Accounting Theory
and Methodology
The selected essays of Geoffrey Whittington

Geoffrey Whittington

LONDON AND NEW YORK
First published 2007
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX 14 4RN
Simultaneously published in the USA and Canada
by Routledge
270 Madison Ave, New York, NY 10016
Routledge is an imprint of the Taylor & Francis Group, an informa business
This edition published in the Taylor & Francis e-Library, 2007.
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© 2007 Geoffrey Whittington
All rights reserved. No part of this book may be reprinted or
reproduced or utilised in any form or by any electronic, mechanical,
or other means, now known or hereafter invented, including
photocopying and recording, or in any information storage or
retrieval system, without permission in writing from the publishers.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data
A catalogue record for this book has been requested
ISBN 0-203-96814-X Master e-book ISBN
ISBN 10 0-415-37644-0 (Print Edition)
ISBN 13 978-0-415-37644-0 (Print Edition)
Contents

Foreword by Stephen A.Zeff ix

Introduction 1
G.Whittington: Publications 18

27
I Empirical studies based on company accounts

1 (With A.Singh) “The Size and Growth of Firms”, The Review of Economic 29

Studies, January 1975, pp. 15–26.
2 “The Profitability and Size of United Kingdom Companies, 1960–74”, The 44

Journal of Industrial Economics, June 1980, pp. 335–52.
3 “The Profitability of Retained Earnings”, The Review of Economics and 63

Statistics, May 1972, pp. 152–60.
4 (With G.Meeks) “Directors’ Pay, Growth and Profitability”, The Journal of 76

Industrial Economics, September 1975, pp. 1–14.

92
II Specification of empirical models

1 “A Comment on the Efficient Markets Interpretation of a Relative Decline 94
Model”, Journal of Business Finance and Accounting, Summer 1978,
pp. 269–73.
2 “On the Use of the Accounting Rate of Return in Empirical Research”, 99
Accounting and Business Research, Summer 1979, pp. 201–8 and (with
L.C.L.Skerratt) “A Correction”, pp. 156–9 of R.P.Brief (ed.), Estimating the
Economic Rate of Return from Accounting Data, Garland: New York and
London 1986.
3 “The Economic Rate of Return and the Accountant”, Vol. 2, Chapter 9, 116
pp. 97–108 of P.Arestis, G.Palma and M.Sawyer (eds.), Markets,

Unemployment and Economic Policy, Essays in honour of Geoff Harcourt,
Routledge: London, 1997.
4 “Some Basic Properties of Accounting Ratios”, Journal of Business Finance 127

and Accounting, Summer 1980, pp. 219–32.
5 (with M.Tippett) “The Components of Accounting Ratios as Co-integrated 141
Variables”, Journal of Business Finance and Accounting,
November/December 1999, pp. 1245–73.
6 (with C.Pong) “The Determinants of Audit Fees: Some empirical models”, 166

Journal of Business Finance and Accounting, December 1994, pp. 1071–95.

191
III Price change accounting

1 Inflation Accounting, All the Answers, Deloitte, Haskins and Sells Lecture, 193
1981, University College of Cardiff Press. Reprinted as pp. 57–72 of

Contemporary Issues in Accounting, with an Introduction by Jack Shaw,
Pitman: London, 1984.
2 “The European Contribution to Inflation Accounting”, pp. 24–42 of Congress 208
Proceedings of the Sixth Annual Conference of the European Accounting
Association, University of Glasgow, 1984.
3 (With D.Tweedie) “The End of the Current Cost Revolution”, Chapter 8, 225
pp. 149–76 of C.W.Nobes and T.Cooke (eds), The Development of Accounting

in an International Context, A Festschrift in Honour of R.H.Parker,
Routledge: London, 1997.

249
IV Taxation and regulation

1 “The Reform of the UK System of Direct Taxation”, in The City—Association 250
Accounting Lectures, Spring 1978. The Certified Accountants’ Education
Trust and The City of London Polytechnic, 1978.
2 “Regulatory Asset Value and the Cost of Capital”, Chapter 4, pp. 91–113 of 263
M.E.Beesley (ed.), Regulating Utilities: Understanding the Issues, Readings
48, IEA in association with the London Business School: London, 1998.
265
V Regulation of accounting and auditing

1 “Accounting Standard Setting in the UK after 20 years: A critique of the 282
Dearing and Solomons Reports”, Accounting and Business Research,Summer
1989, pp. 195–205.
2 (With D.Tweedie) “Financial Reporting; Current Problems and Their 301
Implications for Systematic Reform”, Accounting and Business Research,
Winter 1990, pp. 87–102.
3 “Corporate Governance and the Regulation of Financial Reporting”, 327
Accounting and Business Research, Corporate Governance Special Issue,
1993, pp. 311–19.
4 (With P.Thorell) “The Harmonization of Accounting within the EU: Problems, 343
Perspectives and Strategies”, The European Accounting Review, September
1994, pp. 215–39.
365
VI Surveys and methodology

1 “Financial Accounting Theory: An Overview”, The British Accounting 367

Review, Spring 1985, pp. 4–41.
2 “Positive Accounting: A Review Article”, Accounting and Business Research, 388

Autumn 1987, pp. 327–36.
3 Is Accounting Becoming Too Interesting? Sir Julian Hodge Lecture, May 405

1995, The Registry, The University College of Wales, Aberystwyth.

Index 423

Foreword
Geoffrey Whittington was trained as a Chartered Accountant and then as an economist,
and he has become one of our leading accounting theorists and researchers as well as a
major contributor to standard setting at both the national and international levels.
Geoff received a B.Sc. with an emphasis in accounting in 1959 from the London
School of Economics, where he was a Leverhulme Scholar. After having articled with a
small accountancy firm in London, he was admitted in 1963 as an associate of the
Institute of Chartered Accountants in England and Wales (ICAEW), becoming a fellow
in 1973. He then spent ten years at Cambridge University as a research officer in
economics and as a doctoral student in the Department of Applied Economics. His Ph.D.
examiner was Professor Richard Stone, who was to receive the Nobel Prize in economics
in 1984 for his foundational work in national income accounting. After receiving the
Ph.D. in 1971, Whittington moved back to accounting, taking successive Chairs at the
Universities of Edinburgh, Bristol and Cambridge. He retired from Cambridge in 2001.
Continuing to bridge accounting and economics, he served three terms, from 1987 to
1996, as a part-time member of the UK Monopolies and Mergers Commission. In the
standard-standard arena, from 1980 to 1990 Geoff was a member of the ICAEW
Technical Committee, which advised the Institute’s Council on the endorsement of
proposed standards coming from the Acccounting Standards Committee. He then served
as academic adviser to the Accounting Standards Board from its founding in 1990 to
1994, and was as a board member from 1994 to 2001. In 2001, he became one of the 12
full-time members of the newly established International Accounting Standards Board.
He has served on numerous editorial boards and public and professional advisory
committees, and as a consultant to various bodies. In 1995–6, he chaired the Higher
Education Funding Council’s research rating panel for Accountancy. From 1996 to 2001,
he was the professorial research fellow of the Institute of Chartered Accountants of
Scotland.
Geoff has published with distinction in both accounting and economics, and the
articles reproduced in this collection are ones he has chosen as being representative of his
most important writings. Among the awards he has received are an honorary D.Sc.
(Social Sciences) from the University of Edinburgh, the inaugural ACCA/BAA
Distinguished Academic of the Year Award, and the Founding Societies’ Centenary
Award of the ICAEW.
I am delighted to publish this Whittington Collection as the first volume in this new
Routledge series, Historical Perspectives in Accounting, and I am grateful to Geoff for
having provided the informative introductory essay.
Stephen Zeff
Rice University
September 2005